Wednesday, May 19, 2010

Why Does the Price of Gold Go Up?

Traditionally, there are many variables that have affected the price of gold in the market place. Here are some fundamental guidelines:
-When the US Dollar goes up, Gold goes down
-When stocks go down, Gold goes up
-When oil goes up, Gold goes up

Because there is so much volatility in the market place today and signs show we are in an inflationary period, the rules above no longer seem to really apply and the gold market has now taken on a life of its own.

There are other things that affect the price of Gold like knee-jerk reaction buying and selling based on fear and greed. Collapsing currencies, countries going bankrupt, rumors of war and war, etc. have always affected the price of Gold. People flock to gold as a safe haven during these times.

Of course, there is also the long-term manipulation of the price of gold. The spot price of gold and silver have been manipulated and suppressed for many decades by the central banks, governments and JP Morgan. This was something that was dismissed as conspiracy theory bunk only a year ago and now that the Andrew McGuire story broke through to the international main stream media, thanks to Bill Murphy of GATA, it is being accepted more and more as fact throughout the world.

Recent comments by the media and people such as George Soros that gold is the ultimate bubble seem asinine to me when you consider the following:
- Federal Reserve and other central banks printing money (out of control) causing inflation.
- Gold for millennia has been a safe storage of value – Historically, all civilizations and cultures go back to gold after they debase their currencies. Washington is allowing the Federal Reserve to print money into existence and there are no signs on the horizon that this will end or slow down. - If you look at any historical gold chart, gold has risen with small corrections and pull-backs along the way and in the big picture, steadily climbed. This is a classic sign that gold has been chronically bullish with no bubble in sight.
- Basic Supply and Demand Fundamentals: There is less than 1/2 an ounce of gold above the ground per person alive on the planet right now. What does that mean when failing currencies prompt everyone at once to turn to something more sound?
- Jim Rogers was quoted that he is not selling any of his gold. If gold goes down, he’ll buy more. If it goes up, he’ll still get more. He is certain that due to the imbalances in the world economy and financial system right now, we are heading towards a currency crisis in the next year. Does this sound like the actions of someone who has heavily invested in a commodity that is in a bubble status?
- China has already said that their demand for gold will double in the next 10 years. Is this bubble talk?- Looming currency crises globally - You cannot open a newspaper or turn on your TV today without being told about the declining Euro and other failing currencies. This will become more prevalent in the media in the coming months.Finally, because we know gold is inflation-proof, we know that the price of gold isn't actually going up or increasing in value, it is the value of the dollar that is decreasing. An ounce of gold purchases the same today as what it did 2000 years ago. It is the purchasing power of the dollar that is decreasing.As Simon Heapes said “You cannot study the subject of Gold and Silver without studying its counterfeit, that being the world’s paper currencies.” Simon also recently reminded us that “Taking time to study history gives you the "jump on the crowd." History repeats. Consider King Solomon who said, "There is nothing new under the sun, that that is, is that that will be again." This is particularly true with markets and the emotional reactions of the crowd”.

In history, we have learned that in times of economic hardship and despair, there is also great opportunity. Ask me how you can participate and position yourself for the “Great Wealth Transfer”, which will accompany the looming financial crash.

2 comments:

hello, thanks for this blog, it was nice, i have small doubt which i would like to clear from you, the above passage you have specified that When the US Dollar goes up, Gold goes up , but as far as i ready in many news and other blogs and papers i understood that if "if dollar goes up, gold goes down", please can you explain me.

Hi Selva, You're right. That's a blatant error (typo, whatever). I wrote this such a long time ago and you're the first person to point it out! Of course when the dollar goes down gold goes, up, vice versa. A very fundamental trend historically. I'll correct it and take care!

Gold Wars is a blog designed and authored by Kirsty Hogg to address inflation, hyper-inflation, the long term manipulation of gold and silver, the gold standard, current economic events, peak oil and other related items. It is named “Gold Wars” in memory of Ferdinand Lips who wrote "Gold Wars. The Battle Against Sound Money As Seen From A Swiss Perspective". "In short: Because the world has forgotten the monetary role of gold, our world is in serious trouble. That is the one major reason for the worrisome state of the world. The abandonment of gold as money, of the discipline of gold, is the major reason if not the only reason why our world has become a very dangerous place. In my opinion, it is the biggest tragedy in world history." Ferdinand Lips